BEIS CALL FOR EVIDENCE: BUILDING A MARKET FOR ENERGY EFFICIENCY
This is Carbon Co-op's response to BEIS' call for evidence on building a market for energy efficiency. It should be read concert with this discussion document published in October 2017 by BEIS: Call for evidence on energy efficiency (PDF) and the questions answered below are posed in that BEIS document.
Carbon Co-op's response
Based in Greater Manchester and in operation since 2011, Carbon Co-op is a not-for-profit, community benefit society that exists to assist its members and the wider community reduce their domestic carbon emissions and save energy through whole house retrofit and the provision of wider energy services.
An evaluation of our Community Green Deal project which delivered a whole house retrofit programme using low cost loans with Carbon Co-op acting as main contractor can be found here: http://carbon.coop/news/2017-06-23/community-green-deal-case-study-released and is featured as a case study in the Call for Evidence document.
Beyond this project we carry out a broad range of activities in the area of energy efficiency, ranging from awareness raising events and materials to an income generating training householder programme to the delivery of retrofit consultancy services and My Home Energy Planner whole house assessments.
1) What information do you have on current rates of delivery of measures outside of Government programs, including through DIY etc.?
We track our customer interactions, including their energy saving activities, through a customer relationship management software. We are also in the process of installing smart meter extensions in order to augment this data with real time energy usage.
With 150 members and a reach of 3,000 householders a year, the Carbon Co-op has seen the development of a local retrofit supply chain within the Greater Manchester area, fuelled by personal householder referrals and recommendations and for contractors, an understanding that Carbon Co-op members represent an informed, knowledgeable and committed client base.
Additionally, we are aware of a sizeable number of householders interested in taking a DIY approach – as such we run regular DIY Retrofit courses which to date have been over-subscribed: https://www.eventbrite.co.uk/e/diy-retrofit-for-homeowners-apr-2018-tickets-37250547390
Research carried out by Carbon Co-op suggests the following rough breakdown of retrofit delivery routes among our audience:
- Full whole house retrofit service offered by Carbon Co-op: 15%
- Self procured retrofit, delivered by retrofit professionals and contractors: 60%
- DIY approach to retrofit: 25%
2) What information do you have on the remaining potential for energy efficiency improvements and what savings could be expected from these measures?
Our experience in Greater Manchester is that there is a huge untapped interest in retrofit services and in particular whole house retrofit. The majority of our programmes and projects are over-subscribed, demand is not holding back retrofit in Greater Manchester, the key barriers revealed by our research are:
- i. An understanding of which improvements to carry out first, which will have most impact (this barrier is overcome by an energy assessment – but as discussed below EPC/Green Deal assessments are inadequate for this task)
- ii. Access to trusted, experienced and appropriately skilled contractors
- iii. Access to appropriate, affordable finance
Carbon Co-op are committed to promoting the further uptake of whole house retrofit as only when applied together can these measures help achieve the carbon emission reductions necessary to meet our forthcoming carbon budgets.
We would challenge the contention made under Point 20. that Whole House Retrofit often involves off-site construction and the installation of pre-fabricated walls.
Community Green Deal demonstrated that whole house retrofit is achievable at affordable budgets through traditional on site retrofit works.
Approaches such as EnergieSprong are untested in the UK market, close attention needs to be paid to UK pilot projects to assess whether the promised energy savings can be delivered in reality.
The savings we have been able to achieve through Whole House retrofit are documented in the evaluation of Community Green Deal (see link above).
3) Do you agree with our assessment of the current market for energy efficiency amongst owner occupiers, including the trigger points and supply chain relationships?
We agree with the Trigger points outlined and would add two:
- Visits: Seeing Friends or Neighbours carry out retrofit; visiting a whole house retrofit eco-show home. This 'normalisation' of retrofit, allowing people to see the reality is a strong motivator for new retrofit projects
- Area Based Schemes: if an area based scheme is taking place locally this is likely to create a cluster of demand in the area. Carbon Co-op has seen this take place in localities where we are delivering projects.
4) Do you agree that it makes sense to prioritise those groups most likely to be open to investing in energy efficiency? And do you agree with our assessment of who those groups are most likely to be?
Yes, prioritising groups is very sensible, however, we believe there are a broader range of motivations than stated in the document for commissioning retrofit.
Carbon Co-op research suggests comfort and carbon saving are as important as cost savings to the householders we work with.
There is a significant segment of householders motivated by ethical concerns and taking action on climate change. Depending on how this is evaluated between 15% and 25% of the population are prepared to take consumer decisions on an ethical or environmental basis - http://www.ethicalconsumer.org/portals/0/downloads/ethical%20consumer%20markets%20report%202016.pdf . DEFRA's Framework for Pro-environmental Behaviours (2008) estimated 'Positive greens' to make up 18% of the population.
This demographic should be the key target for BEIS' energy efficiency policy development. Rather than a broad brush approach exemplified by Green Deal, which ends up targeting very few people, an approach that targets 'Positive Greens' a demographic more motivated to taking action and tolerating the disruption of retrofit is the best way to stimulate and grow the retrofit supply chain.
This approach is typified by the innovation curve regularly seen in the take up of new technologies.
5) Do you agree with our assessment of the current barriers to market growth?
6) Are there other barriers that you think we should be addressing?
In 2017, Carbon Co-op carried out a series of focus group interviews with householders carrying out retrofit to help us understand the barriers they face – we are happy to share this research with BEIS.
Some of the barriers we found are additional to the ones outlined by BEIS, some are refinements of the ones identified.
i) Complexity of the issues
Householders don't know who to trust to offer them impartial, independent advice and can lose impetus. Householders highlighted what they described as 'Retrofit fanatics' experts who offer silver bullets and ultimately confuse them.
With planning, assessment, procurement and sometimes staged delivery, retrofit works can take a great deal of time, often many years. Delays and uncertainties demotivate householders and cause them to lose faith in the process. The long timescale can mean that finance options change or are lost.
iii) 'Normalisation of retrofit'
Householders see themselves as pioneers and innovators, there is a need to promote retrofit as the 'common sense' option for improving and modernising the fabric of ones home. Climate change communications best practice suggests that individuals acting alone feel disempowered, there is therefore the need to take collective action on climate change and retrofitting a home with or at the same time as others is a key way this can be achieved.
7) Do you think there are any other important lessons to learn from past attempts to stimulate the market?
Community Green Deal suggested a trusted, independent intermediary, acting on behalf of the householder, as a conduit for finance and ensuring high quality works can unlock latent demand for retrofit.
We believe that Green Deal was flawed in that it tried to reach the mass market for consumers too quickly, that the assessment methodology was too inaccurate to inform significant purchasing decisions and that the approach to quality standards was flawed and failed to take account of the reality of the UK construction industry.
8) Are there other international examples we could learn from?
None in addition to the ones highlighted in the document.
9) Are there any barriers preventing business models for energy efficiency that have developed in other countries from also developing in the UK?
We are most familiar with the German KFW approach – it should be noted that this delivery mechanism was developed over many years and with the long term commitment of German administrations across the political spectrum.
One of the key success factors for the KFW approach, not highlighted in the BEIS document, is the combination of lost cost finance AND high quality standards, to such an extent that KFW has its own quality standard: the 'KfW-Effizienzhaus'.
This is essential, since simply making cheap finance available has the danger of reducing, not increasing quality standards.
More information can be found in: THE KfW EXPERIENCE IN THE REDUCTION OF ENERGY USE IN AND CO2 EMISSIONS FROM BUILDINGS: OPERATION, IMPACTS AND LESSONS FOR THE UK, UCL Energy Institute, University College London (November 2011).
10) Do you agree with the set of proposed principles for guiding our approach?
BEIS should work to improve consumer trust in the policy framework, establishing and maintaining high quality standards.
Policies must be coherent and should be based on latest scientific understanding and evidence.
It should be specifically stated that energy efficiency policies are designed to assist with the delivery of carbon emission reduction targets in line with the UK carbon reduction obligations.
When referring to benefits, social benefits are briefly mentioned, specific reference should be made to health as cold homes have been linked to a wide variety of chronic and acute health conditions, from asthma and extrema to depression and poor educational attainment.
11) Do you agree that the policy areas we have set out are the correct ones to focus on?
In our opinion, on the demand side the key element missing is trust.
Demand Side measures are required to develop consumer trust in retrofit intermediaries.
Solutions for this need to go beyond purely IT and web-based solutions. Experience from Carbon Co-op shows the most effective way to build trust is through the recommendation of friends, family and neighbours or within a community such that offered by Carbon Co-op – Community Energy is an ideal vehicle to achieve this.
The most significant way in which householders find out about Carbon Co-op services is via 'word of mouth' from a friend or neighbour, demonstrating the importance of trusted recommendations.
On the supply side, the key element missing is the establishment and maintenance of quality standards, note EPCs and Green Deal Assessment are seen as cheap, poor and not trusted by the average consumer.
12) Which of the fiscal levers described here would drive the greatest consumer demand?
In Carbon Co-op's Community Green Deal programme Carbon Co-op householders spent between £20,000 and £60,000 on their individual whole house retrofits. Some lessons from the programme include:
- Zero percent interest rates were an attractive offer ““We wouldn't have done it without an interest free loan.”
- In most cases, zero interest loans were matched with householder contributions (some up to £15,000) demonstrating zero percent interest loans have the potential to leverage further investment from other sources.
- Retrofit, in particular whole house retrofit works, are often lengthy and subject to delays, part of the benefit of Community Green Deal was to have a source of finance 'on tap' available to draw down from as works progressed, this also offered a greater degree of confidence to contractors and supply chain.
- In terms of evaluating their investment over a 20 year period (the payback time of the loan), Feed In Tariff payments were an important factor in assuring householders of the long term viability of the project.
- ECO and Green Deal Cashback payments were accessed during the project and generally amounted to £2,000-£5,000 per property. Though useful in subsidising the programme they proved unrealistically burdensome for Carbon Co-op to administrate.
We also have experience of our members using zero percent interest loans from Manchester City Council (HELP Loans) - these loans of between £5,000-£10,000 have proved useful at facilitating small scale and packaged retrofit works. http://www.careandrepair-manchester.org.uk/manchester-services/hrst/the-home-energy-loan-plan/
We feel that the most important mechanisms going forward are:
- Low interest loans
- Some form of direct subsidy similar to FIT to stimulate the retrofit market (though limited and like FIT tapering over time as the sector grows)
13) Is there evidence to suggest that any other fiscal levers not described here could drive consumer demand?
Looking back to the recent past, CERT and CESP schemes incentivised local authority, area-based schemes – we strongly feel that this form of area based delivery should be re-evaluated and an incentive designed to assist it. Such an incentive would work well in the context of city region scale devolution.
We believe there is no reason why ECO cannot adequately function as a direct subsidy mechanism, if the eligibility is returned to its original scope ie including hard to treat properties and an area based eligibility.
We accessed ECO on our Whole House Retrofit programme. The ECO framework as initially designed enabled the cross subsidy of whole house retrofit by subsidising some more costly measures. It was less of a blunt instrument than Green Deal Cashback and required detailed evidence.
It should absolutely be improved - both in terms of the hugely complex administrative process and the measures it funds eg there is complete absence of anything influencing ventilation - but ECO as originally designed would provide a good framework for encouraging retrofit.
14) What would be the profile of homeowners likely to take up these different incentives?
Subsidy should be reserved for more invasive, whole house retrofit works where measures are disproportionately costly in regards to financial benefit. To begin with, recipients are likely to be early adopters, motivated by environmental issues and/or comfort improvements.
Our experience of HELP loans in Manchester suggests low interest loans can benefit a wide range of householders from those carrying out small scale improvements to far larger projects.
An area based scheme could be used to target many different kinds of beneficiaries and tenures.
15) How could these incentives be designed to deliver the best value for money for Government and best savings for consumers?
Incentives need to be matched to quality standards – to ensure investment is not wasted on inappropriate or poorly performing installations.
Trusted intermediaries such as local authorities and community energy groups should be used to assist with the assessment of quality.
Area based schemes are likely to deliver value for money through bulk procurement and savings of scale.
16) What barriers, regulatory or otherwise, exist to financial institutions developing any of these products or incentives themselves?
17) How could Government assist financial institutions with a retail presence, local authorities and other actors to run trials of these ideas?
The challenge is to combine the delivery of these loans with meaningful quality assurance – again, our recommendation is to include the participation of trusted, independent intermediaries representing the interests of householders – such as Community Energy groups.
18) How could we ensure that any trials would lead to the development a self-sustaining market for support?
BEIS can help establish a trusted, shared quality standard. BEIS can help disseminate best practice and successful case studies demonstrating what can be achieved.
In funding trials and pilots, BEIS should prioritise replicable solutions – and where possible open source technology and open data platforms which mediate towards widespread replication.
19) What price signals would best drive uptake of energy efficiency measures?
Our experience suggests incentives are likely to prove more effective at driving demand than price signals – though we believe local taxation benefits for more efficient properties might prove important.
20) What would be the impact on the housing market of such price signals?
Unknown at this time.
21) What protections would need to be in place to ensure that vulnerable or fuel poor customers are not unduly affected by these price signals?
We are not qualified to comment.
22) Could these ideas be rolled out in a smaller scale, to a particular subset of homes or in a particular geographic area, to test feasibility before a national rollout?
Yes, in combination with low interest loans and quality standards and/or an area based approach.
23) What evidence do stakeholders have on the link between installing an energy efficiency measure and the value of property? What research could bolster this evidence base?
Whilst awareness amongst the wider population remains low we have yet to see any clear evidence either way. Anecdotally one householder said they would have achieved a higher house value by converting their loft rather than retrofitting their home – sadly.
24) How could Government effectively deliver messages to promote energy efficiency through intermediaries and which are the most important intermediaries to target?
Intermediaries need to be trusted, knowledgable and independent. ie not-for-profit (eg Community Energy groups), public sector, local authorities.
Web-based solutions alone are cheap but ineffective - householders need tailored, individual, one-to-one advice and a supportive network of peers and householders in order to normalise retrofit and provide support and advice when issues arise.
Our focus group research revealed the important role of 'retrofit buddies' – householders who had completed their retrofit works and we able to advice others on specific technical and construction industry challenges.
The Green Open Homes Network was an extremely effective tool at assisting the normalisation.
25) At which additional points could homeowners be required to have an EPC, and how could this improve their value and the awareness of potential energy efficiency improvements?
There is an assumption in this question that EPCs are adequate tools to inform retrofit works – in our experience they are not. rdSAP is an inappropriate tool to enable householders to make purchasing decisions of this scope and scale.
Householder committed to retrofitting their homes look for trusted, well trained assessors using an adequate assessment methodology – Carbon Co-op has delivered over 100 My Home Energy Planner assessments to date – retailing at £500/visit they include a two hour visit from a trained assessor and a report generated using full SAP. 73% of recipients have used the report specify or plan retrofit works.
Householders we have spoken to comment that EPC assessments are vague often with incorrect information and carried out by poorly trained assessors. They are not the basis on which to plan thousands of pounds of construction works.
As such, we don't feel it is appropriate to compel householders to commission EPCs more frequently as this will not significantly improve retrofit outcomes.
26) How could EPCs be displayed more prominently to prospective homebuyers at different stages of the home buying process?
27) Have we captured all the main sources of additional value of energy efficiency?
Community Energy groups with a generation presence are generally committed to assisting the delivery of energy efficiency improvements in their area.
Local Authorities in particular City Regions: in Greater Manchester there has been a historic ambition to deliver energy efficiency.
29) How could both Distribution Network Operators (DNOs) and Gas Distribution Network (GDNs) be incentivised or required to deliver energy efficiency savings?
Our view is that DNOs should deliver ECO rather than energy supply companies because of the absence of conflicts of interest, the longer investment timescale DNOs work to, their geographical focus and their infrastructure experience (we believe retrofit is an infrastructure priority).
DNOs lack experience of energy efficiency works but are increasingly realising that the electrification of heat will necessitate a huge energy efficiency programme to reduce primary heating demand.
30) Do current market arrangements allow for DNOs and GDNs to fully realise the potential of energy efficiency savings? If not, what needs to change?
For DNOs - no. We recently worked with a DNO on an energy efficiency project application for the Network Innovation programme. The issue they faced is that their obligations end at the meter. Reducing energy demand of a householder counts as 'behind the meter' activity and so cannot be justified under current regulatory arrangements. These need to change in order to allow DNOs to deliver domestic energy efficiency work.
35) How could thinner, less intrusive insulation products be made to be compliant with building regulations?
Though they will at some point be necessary, we don't believe new insulation products are needed in order to kick start the energy efficiency market in the UK. For the majority of UK properties, whole house retrofit is achievable using standard measures, materials and techniques.
37) What changes should be made to the Energy Company Obligation to ensure that it supports the development of innovative energy products and services?
Ventilation systems should be eligible an incentivised under ECO.
38) Are there other ways that Government could help improve access to data energy efficiency and performance of homes for research purposes?
Carbon Co-op have collaborated with URBED and National Energy Foundation to develop an open source, online self-assessment tool that uses Ordnance Survey data. The OS data enables more accurate home dimensions measurements to be made - this data is not publicly available without an expensive licence - releasing this data would aid self assessment and the take up of energy efficiency measures.
39) What would be the impact on the market and investment in energy efficiency of the availability of better data on the actual performance of homes?
We believe releasing such data in an open data format or accessible via Smart Meters using CAD devices would stimulate innovation in this space.
40) Would the supply chain benefit from having a feature in the new Energy Savings Advice service for installers to share best practice and access a repository of advice?
No. In our experience, only a very small number of suppliers are likely to benefit from this, suppliers and contractors work face-to-face and through local established networks and contacts.
41) Would funding for local supply chain growth and coordination lead to additional retrofit measures?
Yes, absolutely. We have seen this with Carbon Co-op's work in Greater Manchester which has created the conditions for the development of a retrofit supply chain.
This evidence suggests supply chain development needs to be carried out in combination with the supply of appropriate finance for householders (along with quality standards) and the presence of a householder intermediary.
As highlighted in the discussion document, investment is required to support the logistical co-ordination skills and tools required to deliver whole house retrofit.
When supply chain, finance and demand all come together a local retrofit market can grow.
We feel locally based, independent, trusted organisations such as Carbon Co-op are ideally placed to coordinate this activity.
42) Is there anything else that central Government could do to support local retrofit supply chain growth and to support builders to carry out retrofit projects?
As discussed above, facilitating Area Based schemes is a powerful tool in creating a thriving retrofit market.
The likely route for supply chain growth is in specific localities where networks of trades and suppliers grow up in combination together.